Inside a fragrant warehouse in this snowy northern village, orchard farmer Hisanobu Katayama watched as his workers gingerly boxed what he proudly called "the Rolls-Royce of apples." As big as softballs and as shiny as gems, the precious produce typically goes from the farm to the glitzy retailers of Japan's big cities -- where the high prices charged for such fruit have earned this nation its reputation as the land of the $15 apple.

To be clear, Japan is not the home of the $15 apple because of a high labor costs, inefficient distribution, scarcity of inputs, or low output levels. Rather, Japanese growers are able to sell "precious produce" at such high rates because there is a strong demand for it, both at home and, increasingly from highly affluent customers in nearby, newly industrialized, Asian countries:

... this year, the most costly crates of Katayama's "Japan's Best" apples are bypassing Tokyo's chic Ginza district and heading to China instead. There, Japanese apples are being scooped up by the Lamborghini-driving, Gucci-toting nouveau riche in Beijing and Dalian at $17 a piece, or roughly 100 times the price of a Chinese apple. Some of the finest specimens, with dragon designs and Chinese characters in their peels, retail for more than $100 each.

The author is keen to note that demand for Katayama's designer apples has not only increased by an order of magnitude in the last few years, but that it has done so at precisely the same time that Chinese growers have been pursuing another highly profitable, yet distinctly different strategy- one emphasizing low-costs and economies of scale.

Katayama's exports to China have soared from two to 20 tons over the past three years despite China's rank as the world's largest apple producer. As developing nations press the industrialized world to open their doors to cheaper foreign produce during the World Trade Organization meeting in Hong Kong this week, Katayama's success explains how he and his peers hope to prosper in the age of globalization -- by cultivating an export market for boutique fruit.

This point is not one to be overlooked as it holds a most vitally important lesson for small, start-up, new entrants, and otherwise-resource-constrained companies under pressure from over-sized, scale-maximizing, low-price competitors: differentiation, whether along product characteristics, geography, or some other dimension can allow you not only to survive, but to genuinely thrive, to penetrate markets previously closed off, and to find ever new ways to stimulate or satisfy consumer demands.

"We've discovered that the richest Chinese are now willing to pay more than a Japanese for the best possible apple," said Katayama, 45, whose apples are also popping up inside London's Marks & Spencer and the banquet halls of Taipei. "The more expensive it is, the more they want it. That's great news for us, because it is the only way Japanese farmers are going to survive."

The crates of "Japan's Best" apples being shipped overseas are only part of a niche-market export boom from high-end Japanese farms. It includes $240 musk melons flying off to Thailand, $3 strawberries heading to Hong Kong and $170 square-shaped watermelons carted to Kuwait.

This trend has been noted by both observers and critics of Japanese agriculture. There is not yet a consensus, however, on what it bodes for the high tariffs the government places on imported foodstuffs and, by extension, the dynamics of the agricultural sector. According to author "longtime critics of Japan said a focus on boutique fruits could provide Japan's farmers a cushion as import tariffs drop." Others, we are told, think that this will serve as a way to perpetuate new subsidies to Japan's politically-powerful farmers.

While I agree that it is too soon to tell, I predict that the trend will accelerate, that it must do so, just as is suggested by this Brazilian agricultural minister:

"Look, the odds are against them when it comes to large-scale agriculture; it's just too expensive for them to do it," said Flavio Soares Damico, head of the Agricultural and Commercial section of Brazil's Foreign Ministry. Brazilian officials have noted it costs Japanese farmers in Okinawa $1,000 to produce a ton of sugar, compared with production costs of $100 to $200 for farmers in Brazil. "But smaller-scale, high-end produce is a real alternative for them. And it is something they do well."

As the success of the strategy is better well-known and appreciated by Japanese and other farmers, I do expect that there will arise price competition in some product segments. There will exist for a long time, however, market opportunites for farmers willing to cater to the tastes of those who can afford both Apple's ipods and $17 designer apples.
apple and iPod and apples and japan and fruit and farmers and agriculture and Food.
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